As China Rejects Carbon Caps, Krugman Pushes Carbon Tariffs

Trying to surmise if China will be willing to agree to greenhouse gas caps is like reading tea leaves. Last week, we got a good sign, via Britain's climate change secretary ("I think they're up for a deal."). Then yesterday, this downer from China Daily: "China stance on climate talks firm." That is to say, the Chinese government "would avoid promising" a cut in greenhouse gases during the 2013-2020 period, and, as we previously noted, instead set a goal to improve energy efficiency by 2020, like the one it currently has: 4 percent per unit of GDP every year.

On top of this, according to previous reports, China would demand developed nations must commit to cutting emissions by 25-40 percent by 2020 while forking over clean tech funding for developing countries.

Of course, China -- like the US, the other big participant at the climate table -- will be playing its carbon cards close to its chest until it's confident the other side will deliver what it considers fair. But "fairness" to each other also needs to be weighed against fairness to the entire planet.

China-U.S. Agreement is Absolutely EssentialThere's little question that an agreement between China and the US at Copenhagen on carbon limits is the best chance the world has to lower its carbon footprint before things get too hot, or too costly to fix.

"If these two countries cannot find ways to bridge the long-standing divide on this issue, there will literally be no solution," said the "Roadmap for U.S.-China Cooperation on Energy and Climate Change," a joint effort by the Pew Center on Global Climate Change and the Asia Society. The project was partly led by Dr. Steven Chu, before he became U.S. Energy Secretary. (I wrote about it previously.)

The report added, "That our planet is now approaching a point of no return on the question of global warming is increasingly self-evident."

Game of Chicken -- or Phoenix?But a sign of a hold-up by the Chinese is significantly weakening support in the United States for a U.S. cap-and-trade system, and for serious American participation at Copenhagen.

And that logic works both ways. If the US fails to concede to China's requests for help with clean technology -- as Chu's report called for in part -- that could break China's willingness to play ball.

And if the US floats more ideas like that "carbon tax" on Chinese imports -- an idea that Chu, then as Energy Secretary, briefly mentioned -- the Chinese are also likely to balk and back out, smelling that protectionist argument.

Carbon Tariff Time?But Krugman notes that if China continues to burn lots of coal without limits, as it says it will for now, tariffs or other penalties may be necessary.

He acknowledges that Chinese officials are "outraged" when the prospect of carbon dioxide caps in China are mentioned. Yes, it's unfair that the West didn't have to deal with such caps during its industrial rise. Yes, caps on greenhouse gases would mean China would have to shift to more renewable energy faster than it's already doing.

But despite their insistence that Western countries should shoulder the burden, they bristle at the idea that Westerners should pay a "carbon tax" when they buy Chinese goods (as CELB pointed out this contradiction earlier). That would amount to protectionism, says China. But, asks Krugman, about this and the other arguments Chinese officials have, "so what?":

Globalization doesn’t do much good if the globe itself becomes unlivable.

Krugman points out that if countries like China (or the U.S.) don't act seriously on climate change now, they will be forced to later, when acting will be difficult and more costly. He continues:

"Sooner than most people think, countries that refuse to limit their greenhouse gas emissions will face sanctions, probably in the form of taxes on their exports."

This is not ideal: Krugman prefers cap-and-trade, recently arguing that the minor upfront costs of implementing a cap-and-trade system would be nothing compared to the costs of not doing so.

In other words, leaders in both China and the U.S. will need to accept their moral and political responsibilities -- or accept the great costs that will come with acting later rather than sooner.

And at some point, those costs, experts say, may not be ones that can be paid off, no matter how big or free our trade is, no matter how much money we have.